Title: Announcement regarding issuance of Disciplinary Board Resolution No. (18/2024 Disciplinary Board) (165/2023 Authority), and imposition of a fine against: 1- Kuwait & Middle East Financial Investment Company in its capacity as liquidator for Al Awsat KD MMF (under liquidation), 2- Gulf Custody Company in its capacity as custodian for Al Awsat KD MMF (under liquidation) for violating the rules of Collective Investment Schemes.

Announcement regarding issuance of Disciplinary Board Resolution No. (18/2024 Disciplinary Board) (165/2023 Authority), and imposition of a fine against: 1- Kuwait & Middle East Financial Investment Company in its capacity as liquidator for Al Awsat KD MMF (under liquidation), 2- Gulf Custody Company in its capacity as custodian for Al Awsat KD MMF (under liquidation) for violating the rules of Collective Investment Schemes.

For the following reasons:
First: Kuwait & Middle East Financial Investment Company in its capacity as liquidator for Al Awsat KD MMF (under liquidation) violated the following:

1- The provision of Item (8) of Article (2-37-7) of Module Thirteen (Collective Investment Schemes) of the Executive Bylaws of Law No. 7 of 2010 and their amendments, in addition to the provisions of Articles (2-37-13) and (2-37-16) of the same Module.

It was proven to the CMA in a strict manner that the liquidator has handed over several liquidity installments (3 settlement installments were executed during the years 2021 and 2023) to a group of unit holders that are parties to legal battle because of the liquidator’s requirement of the unit holders’ signature on the receipt disclaimer form which proves the discharge of the fund and the liquidator from any rights related to the recovered units and the remaining units of the unit holder and any impacts resulting thereof, noting that requiring the unit holder to sign a disclaimer of the fund and the liquidator from any rights related to the units is considered an additional procedure that steps out of his main role and responsibility in dividing the net assets amongst the units holders. 

It was also proven to the CMA in a strict manner that the liquidator has required a total of 30 unit holders that have lawsuits between them and the liquidator to sign a disclaimer of receiving cash liquidation installments for their units, which might subject the liquidator to accountability for the damage incurred by the unit holders in case the he exceeds the limits of the powers thereof according to Article (2-37-16) previously mentioned. Requiring the unit holder to sign this disclaimer may affect the course of the cases brought before the court, in addition to the disclaimer’s statement of the discharge of the fund and the liquidator from any rights related to the recovered units and the remaining units of the unit holder and any impacts resulting thereof, as the disclaimer stipulated that “……, and I discharge the fund and the liquidator from any rights related to these recovered and remaining units and any impacts resulting thereof”.

This proves the violation of Kuwait & Middle East Financial Investment Company in its capacity as liquidator for Al Awsat KD MMF (under liquidation) to the provisions of Articles (3-37-7), (3-37-13), and (3-37-16) previously mentioned.

2- The provision of Article (2-37-15) of the same Module:

It was proven to the CMA in a strict manner that the liquidator failed to include the cash distributions and liquidity installments executed on the fund within the quarterly reports as detailed above, which raises suspicion of the liquidator’s  willful disregard of this material information from the CMA to distract its necessary supervision and monitoring of the liquidation procedures, further to its clear and honest failure to assume care of a prudent person and adhere to its duties as the fund’s liquidator.

Second: Gulf Custody Company in its capacity as custodian for Al Awsat KD MMF (under liquidation) violated the following:

The provision of Article (2-13) of Module Thirteen (Collective Investment Schemes) of the Executive Bylaws of Law No. 7 of 2010 and their amendments, in addition to the violation of Gulf Custody Company in its capacity as custodian of the definition of Care of a Prudent Person and the definition of Custodian included in Module One (Glossary), and the provision of Items (1 and 2) of Article (2-16-2) of the same Module:

It was proven that the custodian did not notify the CMA that the liquidator (Kuwait & Middle East Financial Investment Company) closed the fund’s accounts (Al Awsat KD MMF - under liquidation) at Ahli United Bank – Kuwait, and was not able to manage the account after two years, which resulted in the non-compliance of the custodian with the provisions of Article (2-13) and Items (1 and 2) of Article (2-16-2) of Module Thirteen (Collective Investment Schemes) of the Executive Bylaws of Law No. 7 of 2010 and their amendments.

The Resolution included the infliction of the following penalty: -
“First: Levying a fine against Kuwait & Middle East Financial Investment Company in its capacity as liquidator for Al Awsat KD MMF (under liquidation) in an amount of KWD 5000 (five thousand Dinars) for the first violation and an amount of KWD 1000 (one thousand Dinars) for the second violation.

Second: Levying a fine against Gulf Custody Company in its capacity as custodian for Al Awsat KD MMF (under liquidation) in an amount of KWD 10,000 (ten thousand Dinars for the attributed violation”.

In this regard, the CMA emphasizes the implementation of CMA Law and its Executive Bylaws on all persons dealing in securities activities, and urges them to comply with these rules in order to promote investors' confidence, create a sound investment environment, and implement the Law according to the principles of fairness, transparency, and integrity in line with the best international practice.